Industrialization in India

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Impact of Industrialization in India

The economy plays a significant role in the growth of every country across the world. It is the economy that determines and separates the developed country from the underdeveloped country. The economy of the developed nation depends mainly on the industrial sector while the underdeveloped countries’ economy mainly depends on the agricultural sector. To revive the economic status, industrialization plays an instrumental role in bringing the economical shift in numerous countries across the globe and the same shift occurred with industrialization in India. 


History of industrialization in India

During the colonial period, India followed the non-industrial model as a developing country. However, a significant amount of Indians took this model as a hindrance towards growth and they opined that only industrialization could maximize the economic growth of the country. After independence, India’s first Prime Minister Jawaharlal Nehru employed the tool of industrialization to eradicate poverty from the country. 

With the introduction of industrialization, there was a significant amount of growth through the flow of internal and external economy that pushed the country towards self-sufficiency. Further, the government realized that the potential of exports and agriculture was limited and hence taxation occurred based on the terms of trade. Heavy industry of the country was given attention to by emphasizing imports substitution.

The introduction of industrialisation in India could only be catalyzed through the implication of a centralized and planned economy. The administrative control occurred with the foundation of The Industries Act 1951 which focused on the development and regulation of the industry.

While there were numerous East Asian countries building string private sectors through the intervention of the state, India during the same period were focusing on state regulation over important industries. In the mid-19th century, the industrialisation in India went through two major shifts which were rural electrification and activism of state in subsiding new seeds and fertilizers. 

By the end of 1970, India was self-sufficient in grains with the success of the green revolution. Some of the major changes that occurred during this period were regulation on prices, nationalized banks, trade restrictions and squeezing of the foreign investment.

In the late 19th Century, economic reforms were launched to promote a competitive economy. The promotion of competitive economy opened the door for foreign investment and trade. There was also a considerable amount of reduction in the use of import licenses and tariffs that encouraged the idea of global integration. Such changes enabled import-export trade to carry out business operations without the requirement of permit or license.


Ownership Pattern And Role of Industry 

The progress of industrialization since the year 1951 has been the most important feature of economic development in India. This could be understood through the commodity composition of India’s foreign trade. 

On one hand, the import of manufactured goods has been greatly minimized while on the other hand, import of India’s engineering goods has been maximized. Industrialization also brought the growth of managerial and technical skills which increased the efficacy in operations. There are three categories of ownership pattern which are followed by every industry as per their objective. These three categories of ownership have been discussed below:

  1. Corporate Sector - Various forms of corporate companies fall under this sector which is further subdivided into the public corporate sector and private corporate sector. In the public corporate sector, there are public corporations and governmental departmental enterprises. Whereas, in the private sector there are both public and private limited companies.

  2. Non-Corporate Sector - This sector involves the industrial units i.e. the units in which the owners are either partners or sole proprietor and HUFs ( Hindu Undivided Families)

  3. Others - These industries include village industries units like manufacturing of khadi, sugar mills and similar other industry as such.

Thus, it can be stated that the role of the industry since industrialization had a major impact on the Indian economy.


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FAQ (Frequently Asked Questions)

1. What are the phases of Industrial growth pattern in India?

The growth pattern of industries in India since industrialization has been divided into four phases. 

  • The first phase was from the year 1951-65 which is regarded as a strong industrial base. 

  • The second phase was between 1965-80 also known as deceleration and retrogression. 

  • The third phase was from 1981-91, the period in which the country experienced industrial recovery. 

  • The final and fourth stage was Industrial Retrogression. After this phase, there were an upturn and downturn nineties.

2. What are the factors responsible for industrial slow down?

The factors that are responsible for industrial slow down are as follows:

  • 4.6 per cent decline in the growth of export

  • Overestimation of the rate of demand growth

  • In the first phase of liberalization, there was a considerable build-up in regards to industrial capacity.